Circle has launched a cross-chain USDC transfer protocol for Ethereum.
On the sending chain, the new protocol destroys coins and mints new ones on the receiving chain.
According to an April 26 release, Circle, the originator of US Dollar Coin, has launched a mainnet protocol that allows users to move USDC between Ethereum and Avalanche. Avalanche customers who had USDC on Ethereum previously had to deposit their coins with a Circle partner or utilise a third-party bridge to transfer their USDC from one network to the other. This requirement for USDC bridges looks to be eliminated by the new Cross-Chain Transfer Protocol (CCTP).
On April 13, the team posted a video demonstrating how the new protocol works. It does not lock tokens delivered to its contract, unlike a regular bridge. Instead, it destroys them altogether and creates new tokens on the receiving network. Users can easily redeem these new tokens for bank deposits by depositing them with Circle or its partners.
According to the statement, the team expects CCTP to alleviate the problem of fragmentation in the Web3 ecosystem. There are already several unauthorised versions of USDC floating around on various networks, the majority of them are the result of tokens on one network being bridged to another. Now that there is a formal means to transfer coins from one network to another, the company anticipates that unauthorised copies will gradually reduce in popularity, making the token less confusing to use.
Many of the largest cross-chain protocols, including Celer, Hyperlane, LayerZero, LI.FI, MetaMask, Wormhole, and others, have already pledged to use CCTP in the future, according to the team.
Circle’s vice president of product, Joao Reginatto, believes the new protocol would boost liquidity and capital efficiency in decentralised finance: Developers can use CCTP to ease the user experience, and users can be confident that they are always transacting with a highly liquid, safe, and fungible asset in native USDC.
Circle’s USDC is a fiat-backed stablecoin. According to the firm, each USDC token is backed dollar for dollar in its reserves. Users can generate USDC by creating an account and depositing money with Circle or one of its partners, such as Coinbase. After that, customers can receive the coin on a variety of networks, including Ethereum, Avalanche, Stellar, and Polkadot.
Over the last few years, bridge hacks have cost users billions of dollars in USDC and other cryptocurrencies, as attackers have regularly worked out how to take locked funds from bridge contracts and leave their copies on the receiving network with no support. As digital assets grow increasingly common, developers are left wondering how to safeguard bridges for future usage.